Bouygues to sell network to Iliad if SFR bid accepted

Sun Mar 9, 2014 7:03am EDT
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By Leila Abboud and Gwénaëlle Barzic

PARIS (Reuters) - France's Bouygues Telecom BOUY.PA has agreed to sell its mobile network and much of its spectrum to smaller rival Iliad ILD.PA as a way to head off competition regulators' concerns about its pending bid for Vivendi's SFR VIV.PA.

If Vivendi picks Bouygues' bid for SFR over a rival offer - and if regulators approve the merger - then Bouygues will sell 15,000 mobile antennas and some of its mobile spectrum to Iliad for up to 1.8 billion euros ($2.50 billion), according to statements from both companies on Sunday.

France's telecom landscape is on the verge of a major reshuffle after Iliad's entry to the mobile arena in 2012 sparked a fierce price war. Iliad's Free Mobile service grabbed nearly 10 percent market share and forced its larger rivals Orange ORAN.PA, SFR, and Bouygues to slash costs to cope.

The fallout convinced Vivendi to exit telecoms after seeing core operating profit at SFR, the country's second-biggest operator, halve from 2011 levels to 1.07 billion euro last year.

It had been planning to spin off SFR this summer, but is now weighing two competing bids from Bouygues and local cable operator Numericable NUME.PA. Bouygues has offered Vivendi 10.5 billion euros in cash and a 46 percent stake in new the company, while Numericable offered 11 billion euros and a 32 percent stake in the new company.

Combining Bouygues, the third-biggest telecom group in France, with SFR would give the new carrier 42.8 percent market share, more than current leader Orange. Competition lawyers have said the Bouygues-SFR tie-up would attract tough regulatory scrutiny because of the risk the new company would be too dominant, leading to higher consumer prices.

Numericable faces fewer competition issues because it is not a major player in mobile, although there would be some issues on media and content rights.

Bouygues knew that the main weakness of its bid versus that of Numericable's that it has a greater risk of being blocked over competition concerns, according to a person familiar with their thinking. The deal with Iliad is meant as a pre-emptive strike to get Vivendi's board to pick its bid, the person said.   Continued...

Martin Bouygues, CEO of French industrial and telecoms conglomerate Bouygues, attends the Qatar Prix de l'Arc de Triomphe at the Longchamp horse racetrack near Paris, October 7, 2012. REUTERS/Gonzalo Fuentes